NEW DELHI: Honda Car India, the wholly-owned subsidiary of Honda Motor Co. of Japan will set up a greenfield diesel engine factory at its second industrial location in Rajasthan that have largely remained unutilised over the past five years.

The Indian subsidiary will debut Honda's first global compact car in diesel in 2013 fired by the locally-manufactured engines.

This sub-four metre sedan, Amaze, based on its Brio hatchback model - Honda's strategic model for Asia - would have a 1.5-litre i-DTEC diesel based on its 'Earth Dreams' diesel technology.

"We plan to launch the diesel car at a very aggressive price that would require high level of localisation in the Indian market. We have finalised plans to set up a diesel engine plant at Tapukara in Rajasthan by next year but the finer details regarding capacity and investments are yet to be worked out," he said.

The company would start assembling a 1.5-litre diesel engine by early next year that would initially debut in the Amaze sedan which would compete with Maruti topseller Dzire & Tata Motors' Indigo.

The same engines would also come in Honda's other cars like the new Jazz and the new City sedan that would roll out some time in 2014 for the Indian market.

"The diesel engine would not power any of the existing compact cars like the current models of Brio, Jazz and the City sedan. We will have this diesel technology reserved only for the new cars that would be introduced over the next 2-3 years," Sen added.

According to three different component manufacturers, Honda plans to introduce Amaze in the price range of 5-8 lakh by increasing cost competitiveness through local sourcing and production. "We have been working with Honda to develop components for its new diesel engine.

The component supplies for making these engines would resume early next year as the car (Amaze) is expected to debut in mid-2013," said a Delhi-based auto component maker.

According to company sources, Honda would also supply some of the engine components from the Rajasthan plant to its UK subsidiary. It already makes higher configuration diesel engines in the UK, which are strapped to its popular cars like the Accord and the CR-V sporty utility vehicle.

However, the diesel engine would not be fitted in Accord and CR-V models in India. Amaze, the entry-level sedan, would also be rolled out in a 1.2-litre petrol engine that currently powers its Jazz and the Brio hatchback.